Interview: Total eyes greater role in gas-fired power, renewables in Europe

London (Platts)--13 Feb 2018 552 am EST/1052 GMT

French major Total is considering increasing its gas-fired power generation capacity and renewables presence in Europe, the head of its gas, renewables and power division said, as the company pushes forward with a strategy to improve its green credentials.

French major wants presence along gas value chain: Sauquet

Keeping close watch on German, French policy decisions

Carbon price of Eur20/mt sufficient to eliminate coal

At the center of the initiative is Total's increasing focus on gas -- and LNG in particular -- following the agreed acquisition of Engie's LNG business in late 2017.

But a gas presence all along the value chain -- from production to power generation -- is key to Total, as is the further development of its renewables business, Philippe Sauquet told S&P Global Platts in an exclusive interview in London.

"What is important for us is to be present all along the gas chain, all the way down to the electricity end-user," Sauquet said.

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Total already has a number of power generation assets, including co-generation plants in France and Belgium close to its refining operations, but the company sees a bright future for gas and renewables to work in tandem across Europe.

It created its new Gas, Renewables and Power (GRP) division in 2016, with the goal of preparing the long-term future of the group in the field of low carbon.

"Our aim is to bring low-carbon energy to our customers, with gas on one side and renewables on the other. We see a nice fit between gas and renewables," he said.

Total has made a number of acquisitions in the recent past in a bid to grow its low-carbon business.

These include the takeover of Belgian gas and green power supplier Lampiris in 2016, the acquisition the same year of France-based battery manufacturer Saft, and the purchase of a 23% stake in wind, solar and hydro power generator EREN in October last year.

It is also pushing on organically, and has developed several solar farms in France, including a 7 MW facility next to its refurbished bio-refinery at La Mede.

POLICY UNCERTAINTY

Sauquet said Total was keeping close watch on the political developments in France and Germany, which in the near future could give more clarity on the future of the countries' energy mixes.

A concrete shift away from coal-fired power generation in Germany would give gas a major boost, he said.

"When the Germans finally take the decision to shut down coal-fired power plants, gas would be all the more one of the most economical solutions to bring flexible power to all these interconnected markets -- France, Belgium, Germany etc," Sauquet said.

In France, he said Total was encouraged by the recent policy moves to phase out coal early next decade.

"We still have to see if the target date will be met. But the intent is good and if the shutdown takes place in 2021/22 as announced there will be a need for more gas-fired power generation," he said.

But, the evolution of the French power market is uncertain and depends largely on the fate of the EDF-operated nuclear fleet and how electricity demand develops in the coming years.

"If there is flat power demand and the nuclear fleet is performing well, you may potentially have a case where you don't need more gas-fired power generation," he said.

"But if you have technical risk and any decision to generate less from nuclear, or even shut down part of the nuclear fleet, together with more demand for electricity for cars and other uses, then we can't be sure that renewables will be enough to compensate for this extra demand," he said.

"We think there is a good case for stronger demand for gas-fired power generation in Europe."

Total also continues to advocate for a Europe-wide price on CO2 emissions to help push coal out of the energy mix.

"The ETS in Europe has not been well managed, and we have a very low carbon price which is not bringing a real reduction of CO2 emissions," he said.

"A carbon price level of Eur20/mt should be sufficient to see a shift in generation and a phasing out of coal-fired power."

OWN PRODUCTION

Asked if Total would be open to operating more gas-fired power plants, Sauquet said: "Yes -- definitely. We are willing to be more present in gas-fired power generation than we are today."

He pointed to the situation in Germany where some new CCGTs have been idled because they are more expensive to operate than existing coal-fired plant.

"We are seeing some brand new CCGTs stopped in Germany while they continue to produce from coal. So there could be opportunities for companies like Total that believe strongly in the future of gas to step up and buy some assets rather than seeing them shut down," Sauquet said.

As for building new CCGT, the company has not set any strategic targets.

"Today there is not really a compelling case to build new gas-fired power generation while we don't have a clear vision on German and French policy," he said.

"When it is clearer we could decide to build new capacity."

Total is already becoming a more significant power supplier in France, and launched last year "Total Spring" to supply gas and renewable power to end-users at a 10% discount to regulated tariffs.

"This is part of our long-term vision to continue to grow our market share in France," Sauquet said.

He added that Total did not necessarily need generation assets to grow its supply business given the liquidity on the wholesale power market.

"We don't really need to have our own power plants because there is a wholesale market for electricity and you can source power competitively from the market. Power plants are optional, but they are a valuable and useful option and we intend to increase our power generating assets.

"We are generating value from this presence all along the chain, and we have option to arbitrage the quantities we buy on the market and the quantities we produce ourselves.

"We already produce power, and intend to produce more in the future, especially by adding renewables -- solar farms as a priority and maybe wind farms," he said.